The Sacramento Bee – October 28, 2011

The Obama administration approved significant Medi-Cal cuts Thursday that health care providers and patient advocates warn will reduce access for California's most vulnerable residents.

The decision by the federal Centers for Medicare & Medicaid Services allows California to cut reimbursement rates by 10 percent for doctors, pharmacists and others who serve the state's 7.7 million Medi-Cal patients.

It's a budget victory for Gov. Jerry Brown, who relied on the cut to save $623 million in the state budget. California will fall short of that entire amount, however, because it agreed to preserve rates for pediatric services and home health care.

"We are providing California with flexibility to address their difficult budget circumstances while protecting the health care needs of Californians served by the Medicaid program," said Cindy Mann, deputy administrator and director of the Center for Medicaid and CHIP Services.

Providers and patient groups, who lobbied CMS throughout the summer, said California already ranks near the bottom in Medicaid reimbursement rates, and that a further cut would cause more health care providers to abandon the system. Medi-Cal is California's Medicaid program, serving low-income children, parents and adults with disabilities or other needs.

They also warned that the Obama administration is jeopardizing its own health care overhaul, set to begin in 2014, because the Medi-Cal system will be ill-equipped to handle an influx of new low-income patients who become eligible for its services.

The California Medical Association, which represents more than 35,000 physicians, will ask federal courts to immediately block the rate cut, said CEO Dustin Corcoran.

"We understand there's a budget crisis, but the federal government has chosen to willfully ignore the standard of equal access," he said. "It defies credulity or logic to say there is equal access."

The case may face legal head winds as the U.S. Supreme Court considers whether outside groups such as CMA can challenge Medicaid cuts. Providers and patients have successfully persuaded lower courts in recent years to block those reductions.

Both California and the Obama administration argued at the high court this month that federal officials, not judges, should decide whether states comply with Medicaid standards.

The rate cuts are retroactive to services provided since June 1, said state Department of Health Care Services spokesman Norman Williams.

Under its agreement with the federal government, DHCS has agreed to monitor patient access in the future. Director Toby Douglas said in a statement that state officials are pleased with the decision while calling the cuts "painful but necessary."

As part of a budget deal to erase a $26 billion deficit, state leaders also approved mandatory co-payments for Medi-Cal patients, as well as a conditional cap on health care visits. Federal officials have yet to weigh in on those cuts.

All told, Medi-Cal cuts add up to $1.7 billion, though not all require federal approval.